Fed chair says rate hikes ‘likely to be higher’ than expected

ISTANBUL

US Federal Reserve Chair Jerome Powell said Tuesday the central bank's rate hikes are "likely to be higher" than previously expected.

"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said at the US Senate’s Committee on Banking, Housing, and Urban Affairs. "Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time."

Powell said the latest economic data, referring to the PCE price index, was stronger than expected and suggested the ultimate level of interest rates, known as the terminal rate, is likely to be higher than previously anticipated.

Fed's preferred inflation indicator, the core personal consumption expenditures (PCE) price index, rose 4.7% annually in January, up from a 4.6% year-on-year gain in December. It was higher than the estimates of a 4.3% increase. The core PCE price index rose 0.6% in January, up from a 0.4% monthly gain in December -- higher than the expectations of a 0.4% increase.

The central bank made hikes of a total of 425 points on seven occasions last year to fight record inflation that climbed to its highest in more than 40 years by mid-2022.

"We have covered a lot of ground, and the full effects of our tightening so far are yet to be felt. Even so, we have more work to do," said Powell.

The Fed made a hike of 25 basis points Feb. 1, raising the target range for the federal funds rate to 4.5% to 4.75%. Its next two-day meeting will conclude March 22, when its economic projections will also be released.